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California LDCs Selling Ad Space on Bills

Retail energy service providers and marketers in California have
a new way of reaching California's massive collection of
residential and small business customers. They can buy space on
utility billing envelopes.

Under new state regulatory rules, investor-owned energy
utilities (IOUs) are opening access to their ubiquitous bills that
are mailed regularly to millions of customers. Southern California
Gas in July will be the first of California's monopoly utilities to
sell space for promoting energy-related products and services.

Messing with utility billing historically has been a contentious
issue. A utility dispute with consumer groups in the 1980s over the
billing space went all the way to the U.S. Supreme Court with the
utilities prevailing.

State regulators earlier this year gave the okay for this new
use of the regulated utility billing process, but SoCalGas is the
first of the major investor-owned utilities to implement a program.
SoCalGas is offering these direct mail opportunities on a
competitive bid basis to its unregulated energy companies,
following an agreement with the California Public Utilities
Commission. Eligible bidders will include qualified energy services
companies, home safety product companies, home appliance
manufacturers/retailers, commercial/industrial suppliers and
competing utilities.

"There is supposed to be a process of offering (the space) on a
nondiscriminatory basis," said a California Public Utilities
Commission staff analyst familiar with the issue, noting he wasn't
surprised the first bid winner was a SoCal affiliate. "It doesn't
surprise me that SoCal is the first utility to follow through with
this because this was one of their pet issues. They believe the
envelope space belongs to shareholders, and they basically lost on
that issue, but they are jumping on the competitive process.
Eventually, the utility will have to make a report (to the CPUC) on
what they are doing."

The CPUC staff member said it is likely the other IOUs will
offer the same service under competitive bidding, too.

The first nonutility to submit a winning bid was SoCalGas'
affiliate Sempra Energy Solutions, a certified energy service
provider, which outbid two other unaffiliated rivals, according to
SoCalGas officials. The two competitors were both advertising
agencies representing clients whose products were not appropriate
for the program, said SoCalGas' Rick Hobbs, consumer markets
manager.

Bids can be rejected because of either their dollar amount or
because the type of product or services (the bidders) provide do
not meet "the minimum standards" of the gas utility's CPUC-approved
program, said Hobbs, adding that the utility has received "more
than 100 inquiries so far" about possible bidding in the program.

"We expect even more interest as businesses become aware of our
program and can include this opportunity in their future
advertising plans."

Bidding is conducted three months in advance, so in June, the
gas utility was accepting bids for the September billing envelope
space. SoCalGas currently plans to allocate space for at least one
outside advertiser insert in each of its monthly billings, and it
is prepared to offer additional space if it becomes available,
depending on utility needs.

In the line-item billing program, commercial
businesses-including SoCalGas affiliates-selling energy-related or
home safety-related products or services can bill SoCalGas
customers directly with a separate line item on the gas utility
bill. The bidding process for this service began earlier this
spring, and the first line-item billing is expected to begin late
this summer. SoCalGas has committed to only one bid winner each
year in this program, although there could be more at a later time,
Hobbs said.

Only companies already holding billing accounts with SoCalGas
customers are eligible and the billing charge must be a fixed
amount due either on a one-time or monthly basis. SoCalGas will not
include charges that vary from month-to-month except for a final
settlement. Along with the line item, SoCalGas also will process
customer payments, telephone calls regarding the line item charge
and remit the funds collected to the business.

"Customers will have the convenience of handling several charges
with one payment and will only write one check," Hobbs said. "If a
customer's payment does not cover the entire amount due, any
partial payment will go first to all gas utility charges, with any
balance prorated on an equal basis between the outside businesses,
including the utility affiliates."

Richard Nemec, Los Angeles

&COPY;Copyright 1998 Intelligence Press, Inc. All rights
reserved. The preceding news report may not be republished or
redistributed in whole or in part without prior written consent of
Intelligence Press, Inc.

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